Schnelle v Dent [1925] HCA 12

Schnelle v Dent [1925] HCA 12 - HCA 1925 case summary — Zoe

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to secure repayment of the amount of the plaintiff's then indebtedness, the defendant executed a release of the bill of sale and the plaintiff gave to the defendant another bill of sale over the same goods to secure the same amount as was due under the first bill of sale. Later the plaintiff gave a mortgage 'over other real estate to secure repayment of the advances made by the defendant to the plaintiff's husband. 'The defendant, purporting to act under the second bill of sale, seized the goods the subject of it. 'The plaintiff brought a suit in the Supreme Court of New South Wales in its equitable jurisdiction claiming, substantially, an injunction to restrain the defendant from dealing with the goods, a declaration that the second bill of sale was void, damages in respect of the wrongful seizure and accounts. Before the hearing of the suit the defendant sold the goods. 'The trial Judge held on the evidence that the first bill of sale and the earlier mortgage were void under the Money-lenders and Infants Loans Act 1905 (N.S.W.), the defendant having taken them when he was carrying on business at premises other than those in respect of which he was registered, that it was 9 security for the same amount as was due under the original bill of sale, and in his opinion the only consideration for the second bill of sale was the discharge of the first bill of sale, and, therefore, that the second bill of sale was void, He thereupon made a deeree declaring that the second bill of sale was void and that the defendant was not entitled to seize or sell the goods comprised in it; directing an account of the damages sustained by the plaintiff and payable by the defendant in respect of the seizure and sale of the goods, and an account of what was due from the plaintiff to the defendant on the later mortgage ; ordering the defendant to pay into Court the amount received by him from the sale of the goods ; restraining the defendant from exercising his power of sale under the later mortgage withoutseven days' notice to the plaintiff, and reserving further consideration and liberty to apply. On appeal by the defendant to the High Court,

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A suit was brought in the Supreme Court in its equitable jurisdiction by Constance Etta Dent against Carl Ferdinand Schnelle (sometimes known as Charles Ferdinand Snell). By her statement of claim the plaintiff alleged that the defendant claimed to be the holder of a bill of sale over certain furniture and effects of which the plaintiff was the owner ; that such bill of sale was void under the Money- lenders and Infants Loans Act 1905 (N.S.W.) onthe grounds, amongst others, (a) that there was no consideration for the same, (b) that the transaction was not completed at the registered office of the defendant and (c) that the bill of sale was signed by the plaintiff in blank and subsequently filled in by the defendant without any authority on the part of the plaintiff ; that the defendant, who had claimed to be entitled to certain securities including the bill of sale, agreed to accept a mortgage for £900 or thereabouts over certain real estate of the plaintiff in lieu of such securities and undertook to discharge such securities, including the bill of sale, when called upon to do so and to refrain from taking any steps in connection with the amount of the mortgage for a specified time ; that the defendant, claiming to act under the bill of sale, had seized the furniture and effects comprised in the bill of sale, and threatened to take away and sell them; and that the plaintiff had offered to pay the balance due under the mortgage and had tendered to the defendant £617 10s., being more than such balance but the defendant refused to accept the same. The plaintiff claimed, so far as is material, (1) an injunction to restrain the defendant from dealing with the furniture and effects and an order that he withdraw from possession thereof, (2) an order to produce to the plaintiff certain documents, (3) a declaration that the bill of sale was void and inoperative as between the parties, (4) an account of the amount due by the plaintiff to the defendant and an order that on payment thereof the defendant should discharge all the securities mentioned in the statement of claim, (5) damages

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By the defence the defendant denied substantially every allegation in the statement of claim, and alleged that there was owing to the _ defendant on the mortgage £916 and interest and on the bill of sale £631 and interest, and offered to discharge those securities on payment of the amounts due thereunder. On this defence the plaintiff joined issue. An interlocutory injunction against the sale by the defendant of the furniture was granted on terms with which the plaintiff was unable to comply, and the defendant subsequently sold the goods comprised in the bill of sale. The suit came on for hearing before Harvey J., who stated during _ the hearing that the only questions with which he proposed to deal at the hearing were the questions whether the bill of sale was void under the Money-lenders and Infants Loans Act and whether there _ Was an agreement to discharge the bill of sale when the mortgage was taken, that is, on 22nd March 1922. As to the latter question the learned Judge found that the plaintiff had failed to establish "that there was any such agreement. As to the validity of the bill _ of sale, which was executed by the plaintiff on 10th October 1921, the learned Judge stated the facts, his findings upon them and his conclusions of law as follows : - " It appears that Dent was getting into financial difficulties in December 1920 and that he then began

to get seriously into debi with the defendant Snell, who was a money- lender. On 5th April 1921 Dent and his wife executed a bill of sale over the furniture in their house to Snell to secure the sum of £565 and further advances at 20 per cent interest. The furniture was apparently the property of Mrs. Dent. At this time Snell's registered as a money-lender was at 17 Castlereagh Street, Sydney, but he had ceased to carry on business there for over two years and was in fact carrying on business at 28 Castlereagh Street. The result 'appears to me to be, on the authority of Cornelius v. Phillips (1), hat that bill of sale was void and no money was recoverable from t or his wife. In fact no money lent by Snell to Dent or his wife to 4th October 1922, when he registered his new address, could e recovered from them. Neither party, however, was alive to this osition at the time. In August 1921 Mrs. Dent gave a mortgage

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over her house to secure £420, This was also void in law. In the month of September 1921 Dent began to be hard pressed by creditors; a judgment at law was recovered against him by a creditor, and, in pursuance of a fi.fa. upon the judgment, the sheriff seized the furniture in Dent's house. Dent thereupon prepared and presented to the sheriff an interpleader claim to the furniture - in the name of his wife, who claimed the goods subject to Snell's _ bill of sale of 5th April. The sheriff refused to accept this claim; whereupon Dent saw Snell, and he agreed to make an interpleader claim based upon his property in the goods under the bill of sale. As it was necessary that some solicitor should be employed in the interpleader process and Dent's name had just been removed from the roll of solicitors, Mr. W. D. Schrader was instructed to act for Snell. He took out an interpleader summons, and on 28th September obtained the usual ex parte order for the lodging of security. Subsequently he went into the merits of the matter, and advised Snell that registration of his bill of sale was defective and that in consequence his interpleader proceedings would have to be dropped. The sequence of the events that followed and the dates of the various steps in the transaction are not clear from the evidence. Mr. Schrader has mislaid his call-book which might have enabled him to fix the dates on which he saw the various parties. His bill of costs for the work done for Snell indicates the successive stages of what was done by him, but gives no precise dates. From the evidence and the probabilities of the case these appear to be the facts : - After receiving Mr. Schrader's advice to drop the interpleader proceedings Snell proposed to Dent to let the execution creditor sell to satisfy her judgment, and that he, Snell, should take the balance of the proceeds of the sale towards the discharge of his bill of sale debt. Dent was anxious to save the furniture if possible. In order to permit Mrs. Dent to interplead he arranged with Snell that he should discharge his bill of sale so as to leave Mrs. Dents title free. As a condition for the release of the bill of sale Mrs. Dent was to give Snell a security over an interest to which she was entitled in the Graham estate. A promise was also given that after Mrs. Dent's interpleader proceedings had been started she would give a fresh bill of sale to Snell. These various transactions were carried out,

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set up to avoid the bill of sale and, as the learned Judge said in his judgment, the only question, apart from an alleged agreement to _ discharge the bill of sale when the mortgage was taken, with which he proposed to deal was " whether the bill of sale was void under the _ Money-lenders Act." Upon his conclusion as to that, he made his declaration and decreed relief. It is therefore not a case where, as in Chapman v. Michaelson (1), there is a mere declaration that the bill of sale is illegal and void. The 4th paragraph of the statement of claim says: "The plaintiff charges and the fact is that the said bill of sale is void under the Money-lenders and Infants Loans Act 1905 on the following amongst other grounds namely : (a) there was no consideration for the same; (b) the transaction was not completed at the registered office of the defendant; (c) the said bill of sale was signed by the plaintiff in blank and subsequently filled in by the defendant without any authority on the part of the plaintiff." The plaintiff's claim was : (1) injunction against interfering with the furniture; (2) production of documents ; (3) declaration that the bill of sale is void and inoperative between the parties;

(4) account and on payment by respondent a discharge of the securities; (5) damages and reference to the Master; (6) costs ; (7) further and other relief. It is unnecessary to state the defence in detail, It is sufficient to say the alleged grounds were denied. The learned Judge on 6th June 1924 made a decree by which it was (1) declared that the bill of sale was void and that the appellant was not entitled to seize or sell the goods; (2) referred to the Master in Equity to inquire as to damages in respect of the seizure and sale; (3) referred to the Master in Equity to take an account of sums due by respondent to appellant on the mortgage ; (4) directed that all questions as to the effect of the Money-lenders Act 1905 upon the right of the appellant to recover money lent should be open to the parties; (5) ordered that the appellant should pay into Court to the credit of the suit the amount received by him from the sale of the goods; (6) ordered that the appellant be restrained from selling under the mortgage without seven days' notice to the

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sale plus accrued interest, &c. The discharge of the bill of sale is dated 6th October. The discharge is in these terms : - * Received this sixth day of October 1921 from Constance Etta Dent and Roy George Ironside Dent the within-named mortgagors the sum of £565 in full satisfaction and discharge of the within security.

€, F. Snell. - Witness, W. D. Schraeder, solicitor, 4 Castlereagh . Street, Sydney." The Graham mortgage recites that it is in consideration of £580 advanced, &c., which was covenanted i be repaid with interest at 6 per cent per annum at times mentioned. I give full faith to the parties and to Mr. Schrader as honestly intending to treat the sum of £565 under the April bill of sale as _ paid or cancelled by the new indebtedness undertaken, and the sum of £580 as in substance advanced afresh for the purposes of the new mortgage. 'True, it was in one sense the same sum, that is, the same jount, but only in the sense that it would have been had the 3 formality been gone through of handing notes backwards and "forwards. This is borne out by the notice by Snell of 6th October withdrawing his interpleader claim, in which he says the bill of sale 'now " discharged." The word " discharged " relates properly to the debt (sec. 13 of the Act No. 10 of 1898). Then the arrangement give the new bill of sale of 10th October 1921 was carried out also part of the same arrangement, the sum of £580 being the new t conventionally created by the discharge of the sum of £565 under the April document claimed and believed to be due when the arrangement was made. The same observations as to honesty or criminality apply to the October bill of sale as apply to the Graham mortgage. And in the October bill of sale it is expressly "recited : "Whereas the said mortgagor has applied to the said mortgagee to advance or lend her the sum of £580 . . . Now this indenture witnesseth that in pursuance of the said agreement } in consideration of the premises and of the sum of £580 ing paid by the said mortgagor (the receipt whereof do by acknowledge)" &c. At the foot of the document is this ement: " Received at or before the execution of these presents from the within-named mortgagee the sum of £580 being the

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South Wales a simple substitution of a declaration that the bill of sale is void. On the other hand, there are several of great authority opposed to both. Recalling the relevant facts, the negotiations and arrangements for the bill of sale were completed before the registration of the money-lender on 4th October. But the arrangement was carried out afterwards and the principal parts of the transaction took place at Snell's registered office. These I have narrated in what I have called " added circumstances." It ought really to be sufficient for this first question - which in itself should end the matter - to cite Kirkwood vy. Gadd (1). The effect of the Money-lenders Act of 1905 was fully argued, and Ihave not heard any valid reason why Kirkwood v. Gadd should not be followed. But, as the opinion from which I have the misfortune to differ seems to me to run counter to that decision and other decisions, I am compelled to examine generally the position for future guidance or future warning. It appears from the judgment of Lord Loreburn L.C. that "the agreement for the loan, the advance of the money, and the taking of the security were all transacted not at the money-lender's registered address but at the borrower's private residence" (1). Nevertheless the bill of sale was not invalidated because (still quoting from the judgment) "some letters making the appointment at the borrower's residence with a view to arranging the loan were written to and received from the registered address" (2). Lord Loreburn says further on : - " This Act of Parliament cannot mean that every stage and every incident of every piece of the money-lending business is to be transacted at the registered office. That would be impossible, for such things as making inventories or taking possession of furniture under a bill of sale are part of the business and must be done where the goods are situated. Nor can it be intended to prohibit the employment of clerks and agents, or the transaction outside the registered address of every single thing that could by possibility be transacted within it. That would be needlessly oppressive and would strain the words.

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understand the evil against which it is directed. Without quoting, I direct attention to the succeeding passage in the judgment, and _ would apply it by asking whether, after the express endeavour to comply with the Act on 4th October 1921, the present appellant, in carrying out the transaction afterwards, did what the Act provides, as a second offence and, it might be, so inewrred three months' imprisonment with hard labour. In Sadler v. Whiteman (1) Bray J. held valid a bill of sale though the verbal arrangement was only definitely arrived at at the borrower's house, and the bill of sale executed there and the money paid over there. There had been at the registered address prior correspondence and interviews and the negotiations had proceeded there up to an inconclusive point. Bray J. expressly followed Levene's Case (2) and Jackson's Case (3). T may add that Sadler v. Whiteman (1) was ultimately upheld in the House of Lords (Whiteman v. Sadler (4)). In Blaiberg v. Calvert (5) Lord Sumner (then Hamilton J.) held the transaction valid because the " substantial negotiation" (by which I understand the greater part of the negotiations, which still remained incomplete) took place at the registered office. They appear to have been incomplete until the money-lender went to the borrower's house and there handed him the cheque and got the promissory note. Hamilton J. said (6) - and his interpretation of the cases is important : "There 'was a series of cases in which it was held that the money-lender had kept within the Act, if some part of the transaction was carried out at his registered address" (and he cites some of the above- mentioned cases). He was "bound" he said "to follow those authorities unless there was something in Gadd v. Provincial Union Bank (7) which prevented his doing so." He added: " A trans- 'action which had its inception at that address could hardly be said to be such that the money-lender was carrying on business at an address other than his registered address." Substituting for the word " inception " the words " essential creation in legal form," Lord Swmner's observation applies exactly to the present case.

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y. Laird (1), under statutory provisions substantially identical in effect and, in part, also in words, Turner and Knight Bruce L.JJ. held that a decree was not warranted that contained "a declaration of a mere legal right, and does not give any equitable relief." It was added : " If we should think that an injunction ought to be granted, the difficulty might be removed." In that case the injunction, being "relief," would be governed by equitable considerations, because a Court of equity is not, in regulating the rights of the parties, " entitled indirectly to effect that which you could not do directly " (Lord Hatherley L.C. in Dolphin v. Aylward (2)). In Webb v. Byng (3) the law as in Birkenhead Docks Trustees v. Laird was confirmed ; so too per Lord Cranworth L.C. in De Windt v. De Windt (4). The same view is expressed in Seton (6th ed., p. 166) on the authority of Birkenhead Docks Case. See also Brooking v. Maudslay, Son & Field (5). Until the Judicature Act was introduced in England that was adhered to, and for some time afterwards the full effect of the change was not perceived. There never was previously to the Judicature Act " jurisdiction to entertain a species of action of declarator" which would enable the Court to make declarations on legal as well as on equitable questions (per Kindersley V.C. in Jackson v. Turnley (6) and per Page Wood V.C, in Rooke v. Lord Kensington (7)). It even required the Act 15 & 16 Vict. c. 86 to enable'a declaration to be made in a purely equitable matter without giving consequential relief (8) (see per Lord Davey in Barraclough v. Brown (9)). And that is the law applicable to this case (sec. 10 of the Equity Act 1901). But, as explained by the Court of Appeal in Chapman v. Michaelson (10), the joint operation of the Judicature Act and the new Order XXV., rule 5, vests in the " High Court and not" in "one division of the High Court to the exclusion of the other" (11) a novel practice. That ay) (1853) 4 DeG. M. & G. 732, at p. _ (6) (1853) 1 Drew. 617, at pp. 626,

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Judgment (222 paragraphs)